Why CEO ouster raises concerns over Symantec’s turnaround efforts
Symantec last week announced the termination of Steve Bennett as the company’s president and chief executive officer, and his resignation from the company’s board. The company appointed board member Michael Brown as the interim president and CEO, and said a special committee of the board is on the search for a successor. The release stated that the decision to fire Bennett “was the result of an ongoing deliberative process, and not precipitated by any event or impropriety.” The release further added the company recognized Bennett’s contributions “including developing and leading a series of successful initiatives focused on organizational realignment, cost reduction and process effectiveness.”
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Bennett had been CEO since July 2012 and replaced Enrique Salem, who was also given the boot due to the company’s underperformance. The market had viewed Bennett’s appointment positively back then and shares jumped to the highest in more than a decade. Bennett embarked on a strategic review to turn around the company as shares had lost about 19% of its value during Salem’s three year tenure and profits fell. The company was struggling to expand in the data storage market post the $10.2 billion acquisition of Veritas Software Corp in 2005. It has also grappled with a shift to a subscription model from license-based products. The highly competitive backup and recovery space saw players such as EMC Corp (EMC), International Business Machines Corp (IBM), and Commvault Systems (CVLT) gaining market share. Symantec had also failed to keep pace with the opportunities in the growing mobile and network security space, and the consumer segment saw competition from the free softwares offered by AVG (AVG) and Avast. Bennett had said in a statement during his appointment “My view is that Symantec’s assets are strong and yet the company is underperforming against the opportunity.”
Under Bennett’s Symantec 4.0 strategy, the company restructured the sales organization into new and renewals business teams. It also reorganized its direct sales force into functional areas of information security and information management. The focus of these specialized teams is to generate new business through new customer acquisition or through broadening existing customer relationships. The moves were aimed at improving the efficiency and effectiveness of its sales process.
News reports speculated that Bennett was fired because Symantec’s turnaround has taken longer than expected, and that the company has failed to accelerate on product innovation and growth initiatives. Bennett’s tenure also saw several senior leadership departures including that of chief financial officer James Beer. MKM Partners analyst who was cited in a Reuters report said “I think he (Bennett) got success with the low hanging fruit initially, but when he started to tackle the difficult challenge of changing the sales culture and reorganizing the sales organization … that’s when the cookie crumbled.”
Symantec said the changes initiated by Bennett have helped establish a solid foundation for Symantec’s future, and that it remains committed to its previously announced greater-than 5% organic revenue growth and better-than 30% non-GAAP operating margin targets by fiscal 2017. The company said it is on the lookout for “a leader who can leverage our company’s assets and leadership team to drive the next stage of Symantec’s product innovation and growth.”
Analysts believe the sudden management change has created uncertainty about the company’s future strategy. FBR Capital Markets analyst Daniel Ives wrote that “this abrupt changing of the guard could potentially lead some investors to throw in the “white towel” as it represents a big step backward in the company’s recovery process.” Jefferies analyst Aaron Schwartz said in a research note, “Following the abrupt CEO change, uncertainty around the direction and timeline for the next phase of the strategy will grow. The CEO change comes at a time when the implementation of the new strategic direction is still fairly early and follows several other senior management departures.” He added that deterioration in Symantec’s morale and execution is a risk.